Marketing Strategies with Private Labels During Economic Recession

Marketing Strategies with Private Labels During Economic Recession

Niyazi Gümüş (Bolu Abant İzzet Baysal University, Turkey), Fatih Geçti (Yalova University, Turkey) and Ali Yılmaz (Yalova University, Turkey)
Copyright: © 2020 |Pages: 25
DOI: 10.4018/978-1-7998-0257-0.ch006

Abstract

It is important for retailers to be prepared for these difficult times because economic recession periods can cause serious changes in consumer behavior. Private label product strategy is one of these strategies, since the price sensitivity of consumers is increasing during bad economic times. Therefore, retailers have to give more importance to private label products in order to both pull through these difficult times with minimum casualty and increase their market share after these periods. The main purpose of this study is to investigate the marketing strategies of retailers with private label products during an economic recession. In order to reach this aim, several research questions were asked, and the related literature and practices were examined to answer these questions. It is expected that this study will provide a different perspective by contributing to the academicians and practitioners working in this field.
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Introduction

The retail sector is quite important for the economy since it makes a great contribution through providing opportunities for employment and tax revenues. Sector players should be aware of possible recession and crisis situations and should prepare their marketing strategies for these unpredictable periods since economic fluctuations can affect them very quickly as resulting crisis or recession can cause significant changes in consumer behavior. Consumers place significant restrictions on their retail purchases as a result of the deterioration in their incomes. This situation undoubtedly makes many of the retailers, especially the ones caught in the crisis unprepared, not to overcome this process. Private label (PL) products are one of the strategies used by companies in the retail sector in times of crisis or recession. PL brands are the brands that are created and controlled by retailers (Sayman et al., 2002) and where the retailers have the sole responsibility from development, purchase, and storage to marketing (Dhar & Hoch, 1997).

For a long time, the retailing industry has provided its customers with goods branded by manufacturers. Nevertheless, retailers soon realized the potential benefits of producing and carrying brands of their own – private labels. These PL products are nowadays in many ways considered to be comparable to national manufacturer brands (Parker & Kim, 1997; Hultman et al, 2008). PL products, which are frequently used in good economic times as well, help sector firms to overcome these troublesome processes with minimum damage during periods of recession and crisis. These periods, where consumers are more price sensitive than ever, require different marketing strategies and different suggestions to the consumer. A lot of research has been done due to the importance of the matter. In the past, national brands (NB) were generally perceived to deliver higher levels of product quality and consistency. However, retailers have come a long way from generic white or yellow packed products to almost similar quality with their national brand competitors. Today, it is almost impossible to distinguish them from national brands (Duckler, 2013). Since there is not much difference between national brands and private labels, especially during economic recession periods, people shift towards Private Labels and they remain loyal to their choices even when the low budget periods end.

Recession is one of the main drivers causing private label brands to flourish. It is not a surprise since consumers mostly focus on value, price and affordability during harsh economic times. Thus, economic recession is one understandable impetus behind increasing private label sales and consumers are willing to purchase lower-priced alternatives (Dimitrieska et al, 2017). Also, during the recession periods, it is seen that consumers make their choices in favor of private labeled brands. In fact, private label brands are generally considered to be useful tools to combat the effects of the economic crisis (Arslan et al, 2013).Today consumers are more price sensitive and less brand loyal than ever before (Grundey, 2009). Thus, the economic uncertainty periods stand out as a time of opportunity for private label producers. If they manage their private label programs well, they can offer products at lower prices and ultimately increase their revenue and profitability. As said earlier, private label does not have the bad reputation of the past; consumers do not hesitate to purchase private label products while they tighten their belts to save some money aside (Eqos, 2008).While some retailers are succeeding by effectively implementing their private label strategies during difficult economic times, other retailers may benefit from this industry by using best practices of their private labels. Thus, in order to effectively compete locally or globally, retailers may take advantage of best practices to launch, or scale, their own private label strategies (Eqos, 2008).

In light of the above discussion, the main purpose of this study is to investigate the marketing strategies and practices applied with PL products during the economic recession periods. The other purposes of the study are to examine the relationship between economic recession periods and PL products and to explain the private label applications used by retailers in order to reduce the negative effects of these difficult periods. In order to achieve the objectives of the study, answers to the following research questions are sought;

Key Terms in this Chapter

Recession: A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

Marketing Strategies: A plan of action designed to promote and sell a product or service.

Small and Medium Enterprise: A company or companies considered as a group that are neither very small nor very large.

Retail Sector: The part of a country's economy that is made up of businesses that sell goods through stores, on the internet, etc. to the public.

Private Label: Used to describe goods that are sold using the name of the store, etc. that sells them, rather than the name of the manufacturer.

National Brand: A product with a particular brand name that is available all over the country, rather than just in one area.

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